Space Exploration and Economic Growth: New Issues and Horizons

Space can connect back to the economy in many ways. Space is a factor in the growth and development of modern economies (space economics). Over the past few decades, technology and policy development have led to an increase in commercial interest in space, with two high-income countries -United States and China- currently launching the most payloads to space.

Space technology requires a significant amount of capital investments because of their potential to combat secular stagnation; however,  government policies are enacted to govern human activity in space and prevent privatizing resources. Secular stagnation refers to a state of suffering from low private demand, requiring very low interest rates to sustain demand and achieve potential output. Even so, modern theories suggests the need to highly increase both aggregate demand and aggregate supply through capital investment, growth in productivity, or growth in population. If it were to succeed, the demand in the US would have increased in around 15. to 3.0 trillion to demand over the next two decades. 

The potential of space as a large-scale project to reinvigorate economic growth through the use of mineral resources and improve human well-being. The clean energy transition could lead to substantial increases in the demand for certain minerals. The trade-off being an increase to environmental degradation and the high cost of mining minerals in space compared to the low launch costs is something to think about. 

https://www.pnas.org/doi/10.1073/pnas.2221341120

Europe's Economic Powerhouse Tests A Shorter Working Week

     In an attempt to combat the worker shortage, many firms in Germany are adopting a 4 day work week to try and stay competitive. The organization 4 Day Week Global is spearheading this effort of workplace reform by encouraging firms to participate in this experiment. With the main goal of avoiding a loss in productivity, 50 firms will be utilizing a 4 day, 38 hour work week starting in 2024. Some of the other benefits that firms already utilizing this system claim are increased worker motivation and productivity, savings on fuel for workers with a long commute, and better social and family lives. Many firms are also offering shorter work weeks without a decrease in salary. 

    According to a study by the Hans-Boeckler foundation, about 81 percent of the German workforce, along with myself, supports a 4 day work week. And for those Germans who do not support this, they are still currently able to work for up to 48 hours. Some critics of this change argue that it will inevitably lead to a decrease in overall output. especially as the larger baby boomer generation begins to leave the work force. 

    While the 4 day work week is a far more ideal situation for many people, I think we are a long way away from being able to implement it at a large scale. As long as there is a near global workers shortage, I do not believe that it will be feasible. As the cost of living continues to rise, couples are opting to have children later and later in life, if at all, due to their financial situations. Until we can solve these issues, I do not we will see a 4 day work week in the United States. 

Source: https://www.barrons.com/news/europe-s-economic-powerhouse-tests-a-shorter-working-week-69dd83ee

The Fed's Tenacious Attempt to Rebalance; Consumers Still Not Satisfied.

 As the Fed continues to battle a never-ending rise in consumer inflation, many are predicting that there is still potential the Fed would choose to continue to raise interest rates. After last month's announcement, Fed Chair Jerome Powell stated "inflation is still too high." This made it obvious to economists that another rise in interest rates could still be a possibility as the Fed continues to try and combat soaring inflation rates.

Currently, according to CNBC, because many credit cards have a direct connection to the Fed's Benchmark Rate, average credit card rates have spiked more than 20% setting a new all-time measure. 

Matt Schulz the chief credit analyst at LendingTree reflected on the situation expressing "Credit card rates are the highest they have been in decades and will continue to get higher in the next few months." 

Average Credit Card Rate: October 2023 is 24.46% versus September at 24.45% 

I would expect borrowing costs to remain at their highest levels with many economists arguing that the rates will stay this way for a while in order to balance out. The Fed's tactics will continue to influence and affect borrowing and saving rates on a day-to-day basis. 

Source for Statistics: https://www.lendingtree.com/credit-cards/average-credit-card-interest-rate-in-america/

Article Source: https://www.cnbc.com/2023/10/27/federal-reserve-may-not-hike-interest-rates-what-that-means-for-you.html

Inflation Report Showed Prices Were Still High

 While US prices remained high in September, there is an encouraging sign in the form of a slowdown in pay growth, providing some hope for relief from rising inflation, according to the most recent set of inflation data released. According to the Bureau of Economic Analysis, the Personal Consumption Expenditures Index, which measures consumer prices, increased by 0.3% in August and September but was constant at a high 6.2% for the year. In the meantime, the US Federal Reserve's favorite inflation measure, the Core PCE, which takes fluctuating food and energy costs out of account, climbed by 5.1% yearly. This was somewhat higher than the 4.9% gain from the previous month but still slightly below consensus predictions.

The information highlights the continuous challenge the Federal Reserve faces with tackling the greatest level of inflation in the last forty years. The Fed is expected to raise interest rates one more time in an attempt to regulate inflation and reduce demand, but others believe that given the indications of an imminent slowdown in wage growth, this rate hike may be the last of its kind. The outcome of these efforts will be closely tracked as the Fed struggles to keep the economy stable in the face of inflationary pressures.

Source: https://www.cnn.com/2022/10/28/economy/us-pce-inflation-september/index.html

The affect the war in Israel has on the nation's economy.

 The war in Israel has caused many economists to believe that the Israeli economy will become slow, and that the nation's budget deficit will begin to soar as the nation spend more on its military.

Before the war Israel was had low debt, a current account surplus and high foreign exchange reserves, although growth had begun to slow amid high interest rates, rising inflation and expectations. Since the war the Israeli currency has been on a downward trend which has cause the central bank to ask for 30 billion in foreign exchange to support it. 

The Central bank then had to deal with the question of what they should do with the nations interest rate. The two options were to Reduce interest rates to help bolster the wartime economy or keep them elevated to support the war. The bank picked to keep them the same as they focus on "stabilizing the markets and reducing uncertainty.” Along with this the national debt that is also expected to rise as the increase in spending on defense. 

But as Israel continues to fight the fight against Hamas the government is trying to implement policies to help support its people. With focuses being include housing evacuees from combat zones. Banks and credit card companies, under the government’s direction, are providing repayment deferrals and other financial aid to help households and companies. It's going to be interesting to see how the nation's economy does over the next few months. 

Fed Currently Holding High Interest rates

The fed has been raising interest rates in order to fight inflation in recent times to ultimately avoid the occurrence of a recession. They currently have a tight financial condition while there are several economic indicators showing strength. Leading the fed to decide to keep the interest rates at 5.25-5%, a high of 22 years, with the potential to raise them. The goal of this is to lower the inflation to its target of 2%. Hedge fund managers are predicting that the interest rates will stay for the rest of the year and possibly hike even more early into 2024 or even for the coming years. This is largely dependent on whether the recent increase of economic activity will continue to rise or not. Consumer spending has continued to grow causing the third quarter GDP to grow at 4.9%. This is in despite of a rise of 0.3% in prices, which is the highest in months. But some believe that this growth does not accurately represent the true state of the economy. 

https://finance.yahoo.com/news/fed-expected-to-hold-rates-at-22-year-high-but-leave-hikes-on-the-table-094002863.html

AI investment forecast to approach $200 billion globally by 2025

     AI has the chance to increase global labor productivity by 1% point a year. For this to happen, major upfront investments are needed to happen through digital, physical, and human capital. These investments have the chance to reach 200 billion by 2025. In addition, it is predicted that AI investment could peak of up to 4% of GDP in the U.S. and up to 2.5% in other major AI leading countries. Even though AI investment is hard to predict, business surveys predict that through the second half of the current decade that AI will become even more impactful on investment. Even though AI investment is said to reach 100 billion in the U.S. and 200 billion globally the impact of AI investment right now is far from that. It currently accounts for little shares of GDP. The reasoning behind this is that AI investment currently is only focused on model development, but the reason such predictions of big increases in AI investment is because of the fact that AI is going to push for substantially larger hardware and software in the future. In a survey in 2021, it was reported that, only 4% of businesses use AI, and that a very few expect that AI will affect their labor needs in the next one to three years. However, a significant majority of companies do expect that they will adopt AI in the next 3-10 years. Overall, with all of this being true it can be concluded and predicted that AI adoption will have a major impact on economies, specifically the U.S., between 2025-2030. This makes the crazy statement that AI investment is forecasted to each 200 billion globally not as crazy.

August 1, 2023. Goldman Sachs .AI investment forecast to approach $200 billion globally by 2025. AI investment forecast to approach $200 billion globally by 2025 (goldmansachs.com).

U.A.W Strike Comes to an agreement but may cause other issues

 During the past 6 weeks, the U.A.W. has dealt with workers on strike, demanding a better pay agreement. The U.A.W.'s president, Shawn Fain, has proposed a contract to end the Ford Motor strike and invited other labor unions to align their contract expirations with UAW's. The recent strike was the first to target all three Detroit automakers and aimed to secure substantial wage and benefit increases while reversing concessions made during the companies' downturn. The U.A.W.'s agreement may have some far-reaching implications beyond the auto industry, potentially making other labor unions consider going on strike as a reasonable strategy. With the recent agreement, the U.A.W. gains more influence over decision-making processes and the reopening of closed plants, setting a standard for employee involvement in management decisions. It will be interesting to see how other labor unions will potentially change due to these new U.A.W agreements and how that will play a role in our economy within our given state. 

Zillow Plunges After Verdict on Real Estate Brokerage Commissions

 ZillowGroup and other real estate stocks took a hard hit today following a lawsuit filed against the National Association of Realtors. This lawsuit cost the NAR $1.8 billion USD after claims were made against how real estate agents are paid. Scrutiny is falling upon the commission-sharing system that dictates a 5-6% cut of a home's final sales price, to be split between the owner's agent and the buyer's representative. This lawsuit can potentially reshape the way real estate deals have been done for decades, with the federal government considering banning the commission-sharing system as a whole.

This is big news as the real estate industry has been struggling recently due to mortgage rates nearing 8% and home sales reaching lows comparable to the 2008 Foreclosure Crisis. In addition to this, notable real estate group such as ZillowGroup, Redfin, Opendoor, and others are all suffering major stock price losses. This may be a potential success for regular-joe stock traders looking to buy while the market is cold and prices are cheap. In terms of the macro trends, this lawsuit will solely affect the United States as countries like Australia and the UK have a far less expensive commission system in place.  

https://finance.yahoo.com/news/zillow-plunges-verdict-real-estate-183108068.html

Economic Repercussions of the War in Israel

 The war between Israel and Gaza has been an extremely tragic event going on. The fighting we have seen is terrible, but this is not the only bad thing taking place. At the start of the fighting the first thing to be affected was oil prices, also the most short-run issue. Oil barrels have already increased about $5 a barrel and this increase in pricing is expected to continue. If prices continue to rise it is estimated that the increased oil prices could weigh down global growth by 0.15 percentage point. Oil importers such as Pakistan are already facing economic struggles. There has also been a halt to gas production which has caused gas prices to go up. European gas prices are being affected the most at the moment, and if their gas supply continues to get cut thinner than prices will have to keep rising. Domestically, long-term interest rates have increased which suggests concerns that the higher energy prices will result in inflation, tightening monetary policy. 

Israel's economy has been impacted heavily due to the war. Government spending has increased due to the increased military efforts and paying for securities for their citizens, the labor force has dropped, tourism has dropped, and investment has dropped. Additionally, the shekel has dropped 5% since early October. This caused the bank of Israel to try to stabilize the market, where they chose to sell up to 30 billion USD in foreign exchange reserves. Clearly, this war has had a negative affect on Israel as a country but economically they are really feeling the affects as well. They are losing a substantial amount of money and their economy is getting hammered from the reduction in workers in the workforce which is causing less spending. Hopefully this war ends soon because war and death are just bad and we do not want to see anyone suffering. However, this war also needs to end so that all of this economic in balance can become a thing of the past and markets can get back to a more stable place. 

Polish national bank lowers interest rates as inflation slows

Poland's central bank, the National Bank of Poland, has lowered its key interest rate to 5.75%, citing a decrease in inflation despite it remaining high at 8.2% last month. This move, the second rate cut since September, has raised concerns about political motivations. Analysts had anticipated the cut after a drop in annual inflation from 10.1% in August. The decision contrasts with other central banks worldwide, which are either increasing borrowing costs or maintaining high rates to address inflation resulting from the global economic rebound and increased costs due to events like Russia's invasion of Ukraine.

Press, Associated. “Polish National Bank Slashes Interest Rates as Inflation Slows.” Fox News, FOX News Network, 4 Oct. 2023, www.foxnews.com/world/polish-national-bank-slashes-interest-rates-inflation-slows.

Occupied West Bank paralysed as economy stalls

 The economic crisis in the occupied West Bank has been exacerbated by Israeli-ordered shutdowns, intensified military actions, and settler attacks. These developments have collectively created a grim economic landscape for Palestinians residing in the region. These challenges have reached every corner of daily life, resulting in many hardships. 

  

The closure of major checkpoints has severely hampered mobility and the flow of goods, disrupting the transportation of produce, a key element of the local economy. Sales have dwindled significantly, with many businesses experiencing a 50% reduction in revenue. The disruptions in transportation have not only made it more expensive to conduct business, due to rising fuel costs and longer delivery times, but have also left many shelves empty, causing supplies of essential items like vegetable oil, rice, flour, and sugar to run low. 

  

The West Bank's economic challenges are not new, as it has endured a 56-year-long occupation and persistent restrictions on movement. The United Nations has estimated that the Israeli occupation cost the Palestinian economy a staggering $47.7 billion in fiscal revenues between 2000 and 2017. These longstanding issues were already impacting the economy before the recent events, and they have been further intensified by the current crisis. 

  

In addition, the recent turmoil has led to joblessness for the majority of the 200,000 Palestinian laborers who work in Israel and illegal Israeli settlements in the West Bank. This has led to a significant drop in revenues, as the laborers are unable to contribute to the local economy as they did before. 

  

The Palestinian Authority is particularly concerned about the scarcity of basic items, further exacerbating the economic crisis. The situation is expected to have long-term negative effects on the Palestinian economy, with the repercussions expected to linger, including rising prices for essential goods. 

  

However, amidst these economic hardships, many Palestinians in the West Bank acknowledge that their situation, while dire, is relatively better than that of their counterparts in the besieged Gaza Strip. Despite the challenges they face, they still have access to food and water, and their children are safe and playing around them. This perspective underscores the resilience of the Palestinian people in the face of adversity, as they strive to cope with and overcome the economic challenges they confront in the occupied West Bank. 

Source: https://www.aljazeera.com/features/2023/10/29/there-is-zero-work-occupied-west-bank-paralysed-as-economy-stalls

Will the US economy find balance?

 ​​Ryan Duckworth

Professor Skosples 

Human Biology  

October 19th 2023

Will the US economy find balance?

The US economy currently stands on a thin rope, where the slightest push could tip it towards a recession or guide it towards a soft landing. Bloomberg Economics model shows a message- the risks of recession in 2024 are more pronounced than those of a stable economic path.

While the model, known for its accuracy, suggests a better chance of a 2024 recession, it's important to remember that The Fed typically confirms a recession months after it has begun. However, the model hints at the possibility of a downturn in late 2023. While this prediction might not appear severe at slightly better than a 50% chance, the interpretation depends on one's economic perspective. 

The signs of the past 18 months, including record-high inflation and a steady rise in interest rates, are bright spots. Consumers continue to spend demonstrating that a strong labor market and a delayed impact of higher interest rates due to the pre-pandemic cash reserves and fixed-rate mortgages provide some cushion.

In Conclusion, the US economy is totally up in the air of uncertainty. As we approach the pivotal months of 2023 and 2024, the US economy's journey unfolds, reminding us that the outcome remains uncertain. It's a thin rope, and we can only wait until the future.

Resource

https://www.businessinsider.com/us-economy-recession-prediction-model-2023-10

Israel’s Economy Convulsed by the War With Hamas

    Israel's economy is being "tested to the limits" as the war with the Hamas continues to wage on. Israel mobilized a record 350,000 reservists trying to push the offense on Gaza, which drained roughly 8% of their workforce. Additionally , more than 120,000 Israelis have had to leave their homes due to the war.

The limited workforce, combined with shutdowns of offices, has triggered a crash in activity in Israel spanning from agriculture to banking. This crash is being compared to the impact of Covid-19 pandemic and the lockdowns that brewed from that.

Further estimates from the impact of the war include:

- A staggering $2.5 billion is being lost by the government per Mizrahi-Tefahot, a top Israeli lender.

- Private consumption fell by nearly a third in the days after the war broke out.

- Nearly half of the 500 high tech companies surveyed last week reported a cancellation or delay of an investment agreement.

The war has proven to be a large test on Israel, as well as their foreign relations such as Qatar. The oil rich nation has spent decades as the Middle East's go between, and are constantly criticized by neighboring countries for housing Hamas leaders while maintaining connections to Israel.

The longer the war goes on, the more damage this will cause not only to the fighters but also economies as a whole. For Israel, these devastating losses will become much worse if the war starts to enter a stage 3, or become global.

Article link: https://www.bloomberg.com/news/newsletters/2023-10-30/israel-hamas-war-s-economic-shock-turkey-rates-egypt-pound-egp-black-market#xj4y7vzkg 

Chinese inflation and trade data point to weakness

     China's economy is facing challenges that has economists confused, an absence of inflation. While some economists think that low or no inflation is a positive thing, it can be quite the opposite. A little bit of inflation is typically viewed as healthy for the economy. Inflation encourages more flexibility in pricing and help maintain reasonable real interest rates.

    This lack of inflation can be attributed to a significant drop in food prices, including a 22% decrease in pork prices. While energy prices rose, it wasn't enough to offset the downward pull of food prices. When you exclude food and energy prices, core prices increased by a mere 0.8% year-on-year, which is significantly lower than what's considered ideal.

    The weak inflation is indicative of various economic variables, including slow consumer demand and overcapacity in industries. Consumers who have experienced a dip in home prices, have reacted by saving more and spending less, further slowing economic growth.

    The challenges are not confined to domestic markets. Exports have been dwindling, with only a couple of months in the past year showing growth. China's export decline is largely influenced by the global economic slowdown, trade tensions with the United States and Europe, and changes in supply chain investment patterns. Exports to key partners like Southeast Asia, the United States, and the European Union have witnessed notable drops.

    On the import front, the situation is also not in a good spot, as China's imports have decreased for the eighth consecutive year. Imports from the United States and other major partners haven taken a hit, further underscoring the complex economic landscape China finds itself in.

    In Summary, China's economic challenges, including the absence of inflation, shrinking exports, and declining imports, underscore the multifaceted issues the country is grappling with. It will require strategic policies and global economic shifts to navigate these troubled waters effectively

Russia’s Central Bank Raises Rates to 15 Percent to Curb Inflation

     Russia's invasion of Ukraine has had plenty of effects on surrounding nations including itself. In the year and a half that Russia had spent at war, its economy has been dealing with plenty of issues, issues involving inflation, recessionary risks, declining economy, production issues, etc. In another pole to help stabilize the economy the Central Bank of Russia raised the interest rate by two percent landing it at 15% as of now. This was a policy enacted to reduce the rising inflation which as of now is at 7.5% with them vying to lower it to a modest 4% to 4.5%.

    Russia is also struggling with its production because of a surge in spending which the bank clarified that "it is increasingly exceeding the capabilities to expand the production of goods and the provision of services." This is mostly the case because Russia is now getting close to spending about 1/3 of its budget on defense spending which is translating to a lack in its production center leading to limited supply. Which translates to higher inflation and higher levels of borrowing.

    There are certain fears that the raising of interest rates could slow the country's growth, Mr. Nadorshin, the chief economist at the PF Capital consulting company in Moscow, adds "We are in the moment when growth is transforming into a recession." Though opposite of that there is relief in the people's eyes which they had believed this was all going to be a lot worse so spending and borrowing is continuing steadily. And because of this there has been predicted a low risk of the country falling into a recession and that if this keeps up Russia will return to a growth economy. Another positive for Russia is thanks to Western companies leaving and opening up opportunities for new Russian businesses to fill in the gaps.

    Russia seems to be on the path of stability as of now which could change in the coming months, but for now, Russia is moving toward a good spot as of reports.

Cited Source:

https://www.nytimes.com/2023/10/27/world/europe/russias-central-bank-interest-rates-inflation.html

Ukraine Preparing for a Long Winter of Continued Airstrikes

 Although not much talk is happening any longer of the Russian and Ukranian war, tensions continue to tighten as the winter approaches. 

Ukranies allies met on October 11th to discuss what their plan of action is as the winter approaches. Ukraine's power grid has been a continued place in which enemies are targeting. Ukraine has spent money to build concrete defenses around their most important power grids, as well as invested in backup generators, to try and prevent future total blackouts. 

However, Ukrainian forces and allies are discussing whether or not Ukraine will be able to last through the harsh winter approaching. Ukrainian expert, Nico Lange, stated that he worries that Ukraine does not have enough sufficient supplies to stand off their attackers. However, Ukraine has become almost entirely dependent upon Western Systems for their war technology. 

Therefore, as the winter approaches it is important to stay connected to what is occurring in Ukraine as it seems that Ukraine has reached its final breaking point in the war. Therefore, only time will be able to tell what will occur through the winter and if Ukraine can last the continued airstrikes from enemies. 

Link to article: https://www.economist.com/europe/2023/10/24/ukraines-allies-are-scrambling-to-bolster-its-air-defences

Cited: “Ukraine’s Allies Are Scrambling to Bolster Its Air Defences.” The Economist, The Economist Newspaper, www.economist.com/europe/2023/10/24/ukraines-allies-are-scrambling-to-bolster-its-air-defences. Accessed 30 Oct. 2023.

Ghana Plunged into Darkness

Over the past couple of years, Ghana has been facing difficult economic times that are started to affect a wide range of its citizens outside of the monetary sense. Ghana's residences are facing constant and unannounced power outages as the country is facing a worsening power shortage. The shortage is stemming from the country not being able to supply their generators with enough natural gas to fuel the country's supply. For the affected residents in Ghana, there is currently no timeline to when their power will be restored as there seems to be little to no communication from the government. However, Residents are starting to rise up against the government as inflation rises and their local currency continues to plummet in value. Residents have also seen a substantial hike in energy rates, making the situation all the worse for them. While Ghana is not currently in a major energy crisis, experts are saying that they are certainly heading towards that direction.  

Source: 

https://www.cnn.com/2023/10/27/africa/ghana-plunged-into-darkness-amid-country-economic-woes/index.html

Where will the 30-year fixed mortgage rate be at years end and onward?

 Currently, the 30-year fixed mortgage rate as at an astonishing 8%. This is the highest it has been since the 1980s when the rate was over 15%. In the past few years, it has been shifting between 4-6%. Why is the rate so high? There are a few different reasons for this. 1. The rise in inflation. 2. The uncertainty about what the Federal Reserve's next move will be. As a result, home buying demand has dropped significantly to low levels that have not been touched since the mid 1990s. According to MBA loan applications, mortgage applications have been at a record low based on the past 2 decades. 

According to the NAR, the predicted average 2023 fixed rate will be 6.9% and in 2024 will shrink to 6.3%. Unemployment will rise in 2024 as there is potential for an economic recession. With a recession, comes a compression of the job market. There is a lot of uncertainty for those who want to buy homes as their purchasing power is much lower than it typically is. Only time will tell to see whether mortgage rates recover or not.

The Impact of Inflation on Consumers

 We notice prices rising constantly in our everyday lives, from gas to groceries. We have no control over our grocery prices besides to substitute but what if prices are raising all around? We may notice that prices seem higher but we are not sure how much they actually increased or how much more they will increase. In this post we will be exploring the Consumer Price Index and the actual effects of inflation on consumers. 

There is not a set way of measuring inflation but a good measure to use is the Consumer Price Index which measures the cost of a market basket of consumer goods and services. The latest CPI numbers released from September show a 3.7% increase in all items (U.S. city average). The CPI shows medical care becoming lower in price, but rising prices everywhere else across the board. The decrease in medical expenses is great for people who need a fair amount of medical care; but for many families the rise in energy, food, and all other prices is detrimental. One issue with inflation is it declines living standards because the cost of living is rising while wages are sticky. This causes people to virtually become poorer. There has also been an extraordinary increase in housing prices from even a year ago. This is becoming a huge worry for young adults and college graduates looking into buying their first home. With the strain inflation has on consumers, economists are hoping the Fed's policies will combat inflation leading to less strain on consumers. 

GregIacurci. (2022, July 15). Inflation poses a “clear and present danger,” says Manchin: Economists weigh in on how it can hurt and help consumers. CNBC. https://www.cnbc.com/2022/07/14/how-inflation-can-hurt-and-help-consumers.html 

U.S. Bureau of Labor Statistics. (n.d.). Latest numbers. U.S. Bureau of Labor Statistics. https://www.bls.gov/cpi/latest-numbers.htm